Short Term Market Thoughts
From 1990 to 1997, Kevin Haggerty served as Senior Vice President for Equity Trading at Fidelity Capital Markets, Boston, a division of Fidelity Investments. He was responsible for all U.S. institutional Listed, OTC and Option trading in addition to all major Exchange Floor Executions. For a free trial to Kevin’s Daily Trading Report, please click here.
The SPX closed yesterday 1141.69, which is a new rally high and +71.2% off the 666.79 3/6/09 bear cycle low. The market is ST-O/B with the 4DMA’s of the Volume Ratio 73 and Breadth Ratio 66, in addition to very O/B momentum indicators. Investor sentiment surveys are as bullish as they were at the 2007 top.
In the previous commentary I said the odds were 65-35 that the SPX would trade up to the 1200-1250 key price zone, which includes the 1229 .618RT to 1576 from 667. That is only +7.6% from the 1141.69 close yesterday, so it is obviously not a stretch. However, the ST-O/B condition is likely to get worked off first, and the SPX will probably pull back to at least the 20 or 50DEMA’s at 1122.77 or 1097.34, and a -10% correction from yesterday’s close would see the SPX at about 1027.52 versus the 200DEMA at 1032.70.
Mid Jan is a key time period, especially since 1/15/10 is the .618RT in time of the 352 trading day decline from the 10/11/07 1576 top to the 667 low on 3/6/09. If the SPX should trade straight to that 1229 key price zone into the .618 time symmetry without a real pullback, then it will be a high probability short zone, and I will have exited 75-80% of the scale down long index proxy position bought in Feb/Mar 2009.
The Banks and many of the low price financial single digit junk stocks have made sharp % gains the last four days to start the year, but the key for day traders is that the energy and materials stocks have come out so strong, with the OIH +8.0% the first 3 days, HUI +7.0%, XLB +5.1%, and the XLE +5.2% The “Generals Pullback” swing trade in the OIH was a home run as it hit 131.26 this morning from the 110.44 low at the 200DEMA, which also had other symmetry that I use with the Trading Service. The trade was anticipated in advance, and the technicals were right at the key level, so traders were good to go.
The OIH has gained +18.9% through this morning from that 110.44 low (entry at 110.75) and crude oil (WTIC) ran +19% in 19 days to take out the previous $82 high, which is certainly not a positive as the “gang” runs prices up in the winter season and the retail person gets taken to the cleaners once again. For those of you that missed the initial posting of the OIH trade I have included it again today.
Have a good trading day!
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